NEW YORK, Mar 19: The Nasdaq stock market's parent and the American Stock Exchange approved a merger they said would move them into the 21st century and preserve Wall Street's dominance as the world's financial capital.The two markets will continue to operate separately. But their alliance would offer companies and investors the benefit of trading stocks either over the Nasdaq's electronic trading system or in the Amex's floor-based auction market.The marriage of America's second- and third-biggest stockmarkets would improve efficiency and save money for companies that want to raise capital, and for the dealers and investors too, executives said. It also would provide tougher competition for the venerable New York Stock Exchange.
``At the end of the day this is a major plus for the investor,'' said Frank G Zarb, chairman and chief executive of the Nasdaq. ``We drive down costs, big time and the member firms have material savings which can be passed on to investors.''
The deal is expected to result in aundetermined amount of jobcuts in areas where services are duplicated, but Zarb said he didn't expect massive layoffs. ``Some people whose positions are eliminated could be retrained for jobs in other areas,'' he added.
In a news conference on Wednesday in New York, Zarb said that the Nasdaq hasn't ruled out combining with other exchanges but that he didn't want to suggest ``we are on a hunt.'' he said the Nasdaq has talked with other exchanges in the United States and abroad.
``We clearly would listen to others who want to talk about sharing our concept going forward to see whether there was fit,'' he said. ``We are not right at this moment today in deep negotiations, but that doesn't conclude something in the future.''
The combination of the Nasdaq electronic trading system and the Amex auction market creates a hybrid exchange that is similar to those that are found in other major world financial markets. Its familiarity would be more appealing to foreign companies.
Under the plan, the Nasdaq willspend more than US$ 100 million upgrading the technology of the Amex. Officials said the Amex-Nasdaq combination is the first step in creating a ``market of markets'' that capitalizes on innovative electronic technology.
The deal still faces approval by industry and antitrust watchdogs. It also requires backing from two-thirds of the Amex's 864 members, including traders, brokers and investors who buy exchange seats for their value and lease them.
The Nasdaq only needs approval from its board to proceed with the merger. But the Amex is owned by its members and therefore needs their approval as well. Approval from the Amex members could be a sticking point because the merger could cost some of the floor brokers at the Amex their jobs as well as water down the value of seats on the exchange, which are now listing for about US$ 450,000.
To address concerns from Amex members about the value of their seats, the two stock markets have set aside US$ 30 million to help protect investors from such losses. ButRichard F Syron chairman and chief executive of the Amex, said the merger would lead to a growth in business and the value of Amex seats.
The Nasdaq, which was founded in 1971, has enjoyed a meteoric rise. It is home to some of America's biggest high-tech companies, including software giant Microsoft Corp. It had 5,487 listed companies at the end of 1997.
The 87-year-old Amex has been eclipsed by both the New York Stock Exchange and the Nasdaq. It listed only 771 companies at the end of last year. Nasdaq's average daily stock volume is 646 million shares, compared with the Amex's 24 million.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
